Liquidity Traps and Monetary Policy: Managing a Credit Crunch
- (pp. 110-38)
Abstract
We study a model with heterogeneous producers that face collateral and cash-in-advance constraints. A tightening of the collateral constraint results in a credit-crunch-generated recession that reproduces some features of the financial crisis that unraveled in 2007 in the United States. We use the model to study the effects, following a credit crunch, of alternative monetary and fiscal policies.Citation
Buera, Francisco J., and Juan Pablo Nicolini. 2020. "Liquidity Traps and Monetary Policy: Managing a Credit Crunch." American Economic Journal: Macroeconomics, 12 (3): 110-38. DOI: 10.1257/mac.20170040Additional Materials
JEL Classification
- E31 Price Level; Inflation; Deflation
- E44 Financial Markets and the Macroeconomy
- E52 Monetary Policy
- E62 Fiscal Policy
- G01 Financial Crises
- H63 National Debt; Debt Management; Sovereign Debt
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